Dan Martinez & Associates, L.L.C.

Hotel Consumables Tax Exempt

If you are a hotel that provides soap, shampoo, conditioner, mouthwash, shower caps, pens, notepads, and other similar non-reusable, consumable items (“hotel consumables”), you are in luck!

As you are likely aware, the Texas Comptroller of Public Accounts (“Comptroller”) has long held that hotel consumables placed in rooms for use by hotel guests are subject to sales and use tax at the time of purchase. On April 11, 2013, however, the Texas Court of Appeals reversed the district court’s judgment and the longstanding position of the Comptroller by ruling that such hotel consumables are exempt from sales and use tax. In its opinion in DTWC Corp. v. Combs, No. 03-10-00801-CV (Tex. Ct. App. April 11, 2013), the court reasoned that hotel consumables are being sold by the hotel to its guests and, therefore, qualify as non-taxable under the plain meaning of the sale for resale exemption codified in Section 151.302(a) of the Texas Tax Code.

The Comptroller did not file a petition for review with the Supreme Court of Texas by the deadline, so the Appeals Court’s decision is final. This means that if you are a hotel and have been paying sales and use taxes on purchases of hotel consumables, you may be eligible for a significant tax refund. Our state tax specialists at M&A can assist, so call for a consultation now!